Question

Suppose the demand for the ibm personal computer is :
Qd=2400-4p.
A) At what price is the price elasticity of demand equal to zero ?
B) when the price elasticty of demand equal to 1, what is the quantity being demand at that point.

Answer 1

It is given in the question that the demand for the ibm personal computer is :

Qd=2400-4p.

We know that the demand function is given by,

 Q = 2400 – 4P

This can be rearranged to form:

(P = (-1 over 4)Q+600)

Now, (1)  Elasticity, (epsilon = 1over mid Slope mid(P over Q) = 1over mid (-1/4) mid(P over Q)) (2)

(a) At what price is the price elasticity of demand equal to zero?

Answer-- For elasticity of demand to be equal to zero, (epsilon = 1over mid (-1/4) mid(P over Q) = 0) Hence, elasticity is equal to zero when Price given is equal to zero.

(b) When the price elasticity of demand equal to 1, whats the quantity being demand at that point?

Answer-- When the price elasticity of demand which is given  is equal to 1, (epsilon = 1over mid (-1/4) mid(P over Q) = 1) => Q = 4P

Since we also know that Q = 2400 – 4P Substituting the value of 4P by Q, then we get Q = 2400 – Q => Q = 1200